Monetarism, Theory, Evidence & Policy

adaptive expectations adjustment aggregate demand assumption balance of payments banks bonds budget deficit capital ceteris paribus changes in nominal chapter currency ratio demand for money deposits determined discussed effect empirical evidence excess demand expansionary expected rate figure finance fiscal expansion fiscal policy fixed exchange rates floating exchange rates Friedman government expenditure high-powered money increase interest rates investment IS-LM model Keynesian labour liquidity trap LM curve long-run equilibrium monetarist view monetarists argue monetary approach monetary base monetary expansion monetary policy money balances money demanded money function money stock money supply money wages natural rate nominal income output payments deficit Phillips curve predictions private sector quantity of money quantity theory rate of change rate of inflation rate of interest rate of monetary rational expectations real balances real income relationship reserve ratio result rise shift short-run stable supply of money transmission mechanism unemployment unstable variables velocity wealth Y₁ zero